Sept. 26–As farmers age, who will take over their operation?
This is a question more producers should be answering.
“Nobody likes the thought of their end,” said Allan Vyhnalek, an educator with the University of Nebraska-Lincoln Extension office in Platte County. “The fact is that we as people, and especially farmers and especially guys as farmers, don’t tend to want to plan, especially for our demise.”
Vyhnalek is not just speaking from experience. An Iowa State University survey found that only 49 percent of farmers had identified a successor for their farm or ranch, even though 60 percent of them were 55 or older.
The 2012 Census of Agriculture found that nationwide the average age of the primary operator on a farm or ranch is 58 years old. Operators in Platte, Polk and Colfax counties are slightly younger, with an average age ranging from 53 to 55 years, though 12 percent of Platte County farms are run by someone at least 70 years old.
Regardless of whether retirement is five or 10 years away, Vyhnalek said it’s important for operators to know what they want to happen with their farm.
“I’m done farming, this is my last day, I’m not coming back out to farm anymore. What am I doing with the keys to my farm?” said Vyhnalek. “Are you going to hand them to the next generation? Are you handing them to the auctioneer to sell your stuff off? Or have you passed away and your estate has to deal with it? You have to establish that vision first.”
Once the farmer has that vision in place, they’re able to make decisions regarding land, equipment and management that work toward that end.
UNL Extension educator Dave Goeller and attorney Joe Hawbaker gave presentations on succession and farm transitioning at Husker Harvest Days. They plan to hold 10 to 15 full-day workshops across the state each year for the next three years, but for the Grand Island event they gave a one-hour preview on succession and estate planning and retirement.
“Some people will say, ‘I’m never going to retire, I’m going to work until the day I die,” said Goeller. “And I say, ‘That’s great, that’s a good plan. But if you’re going to manage until the day you die that probably means that someone’s going to have a very difficult time taking over management of your business.'”
The majority of farmers plan on having a family member take over the farm. In order for this to work, Goeller says, the current operator needs to train their successor by including them in decision-making before they take over management.
“It’s similar to thinking about if you were going to teach someone to swim. There’s a certain number of folks that would survive if you throw them into the deep end of the pool,” said Goeller. “But if you want to improve the chances of them being successful, take them into the shallow end of the water and teach them.”
For example, the first two years the current farmer explains why he bought certain seed and fertilizer, then the next two years they include the protege in making those decisions. Finally, the older farmer allows the new farmer to take over the management decisions but is still on hand for assistance.
What’s key, said Goeller, is creating a timeline for how the succession will work.
But the management skills aren’t going to help if the successor doesn’t have access to the resources they need to successfully manage the farm — such as land, equipment and livestock. This can be complicated if the farmer has children who are not involved in the operation.
Joe Hawbaker, an attorney with Legal Aide of Nebraska, said the issue is very common.
“The difficulty for parents like this has been, how do we maintain this farm or ranch as a viable, ongoing operation into the next generation and also provide some benefit, some inheritance, for the off-farm kids?” said Hawbaker.
The bulk of many farmers’ and ranchers’ assets are in their property. So how does the farmer extract that wealth without breaking up the farm?
Hawbaker said there are a variety of tools — buyouts, leases and rents — that farmers can use to accomplish this, but they need to know what their final goal is.
They also need to consider their living will — who takes over if they’re incapacitated — power of attorney and long-term care. Outside Omaha and Lincoln, AARP’s website calculates assisted living centers in Nebraska cost approximately $32,000 a year for care and nursing homes range from $64,000 to $69,000 a year, expenses that can eat away at estates.
Columbus attorney Thomas Fehringer said if parents plan ahead and communicate their wishes with their family, they can avoid some potential “dynamics” between siblings.
“(The siblings) may not agree 100 percent with what mom and dad decided, but if mom and dad have planned properly, they accept those decisions more easily,” he said.
For those who don’t have successors in the family, Fehringer said, agriculture is unique in that there are a lot of opportunities to bring someone from outside the family onto the farm.
Goeller said giving a new farmer their start, as opposed to selling land to an established farmer, has a stronger impact on the community.
“(Selling to an established farmer) doesn’t help bring another family back into the community,” said Goeller. “And that wouldn’t put another set of kids in school or doesn’t put people in the pews at church or new people buying things at the local store. So it has a community impact, as well.”
(c)2015 the Columbus Telegram (Columbus, Neb.)
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